Feed Your Cows Well For Best Efficiency

With winter months ahead, keeping an eye on herd body condition will be essential to easy calving and re-breeding, says Jason Cleere, Texas A&M beef cattle specialist.

Cleere says lack of proper nutrition can hamper re-breeding efforts on a cow-calf operation.

"Nutrition is extremely important to the cow-calf operation," Cleere says. "The way we manage cattle to calve at two years of age and have a calf every year, you've got to have some nutritional management out there for them."

He says one of the most important things producers should do is look at the body condition of their cows.

To read more of Cleere's suggestions, click here.

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A Decade Later, U.S. Beef Industry No Closer To 48-Hour Traceback

48hour traceback

Even if you support mandatory animal identification (ID) and tracking, you’d be excused for not knowing the requirements of USDA’s Animal Disease Traceability (ADT) program; or the fact, with exceptions, that official ID and documentation have been mandatory for the interstate movement of cattle since March 11.

The journey to the industry’s original, clear-cut ID destination — traceback of any head of livestock within 48 hours — has been long (more than 10 years) and herky-jerky (the program is in its third name and incarnation). It’s also littered with many roadblocks, real and imagined.

The destination has changed, too. Rather than 48-hour traceback, ADT steers toward a bookend type of system: that is, to know the identity of the cattle headed into one end of the marketing channel and coming out the other, then to piece together the history in between, if necessary.

The ride of choice has changed, too. While approved electronic ID (EID) is an option (along with dangle tags, brands in some cases, etc.), USDA is making metal clip tags available cost-free to producers … as long as funding permits.

Think in terms of the ones used as part of the brucellosis eradication program: the brite tags. They’re hard to beat for providing permanent ID, but they’re less than ideal if you need to grab an ear, read the tag and transcribe the tag number on a load of cattle at the speed of commerce.

Those metal tags are cheap, though. Besides, for all of the top-notch technology available, none have convinced the industry that they are a comprehensive solution.

 

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For the record, “Traceability for Livestock Moving Interstate” is the rule that became law, underpinning ADT. Unless specifically exempted, livestock moved interstate must be identified with an official form of ID and moved with a Certificate of Veterinary Inspection or other approved documentation.

For beef cattle, the rule applies to sexually intact cattle older than 18 months of age. The notion is to take baby steps before extending the requirement to feeder and stocker cattle. That makes a world of sense on one hand. On the other, it delays the inevitable, which is a whole different beast.

Keep in mind that beef cattle are the 2-ton monkey in the ID closet. Dairy, pork and poultry have longstanding ID and traceback programs that are part of how they do business, and that easily comply with ADT.

Even with the shorter-journey, user-friendly mode of transportation, and ample opportunity to learn the gears before tackling feeder cattle, plenty of potholes remain. Among these is the simple fact that state animal health officials must implement the federal law while continuing to comply with their own animal movement requirements. In other words, two different states’ laws may be in compliance with ADT, but the form of ID or documentation that complies with each other’s state laws may be different. This is creating a fair bit of confusion so far.

A white paper from this summer’s Joint Strategy Forum on Animal Disease Traceability identifies specific challenges and priorities.

None of this is to ignore the folks who began identifying cattle electronically a long time ago for management purposes, and to exploit marketing opportunities. And none of this is to suggest that mandatory animal ID and tracking are unnecessary, or that ADT can’t ultimately achieve what it’s designed to do.

At its best, though, ADT can’t provide the level of traceability some consumers and nations desire. That will likely become more pronounced when the industry has the supply necessary to chase after the market share it’s currently losing — due to a contracting cowherd — to pork and poultry domestically, and to other beef-producing countries abroad.

At its best, ADT can’t provide 48-hour traceback. ADT may be mandatory, but like the federal programs that preceded it, the National Animal Identification System and the U.S. Animal Identification Plan, the reality of 48-hour traceback continues to shimmer a ways in the distance.

 

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25 Facts About Farm Kids

Last week, I had the chance to speak to 385 farm and ranch women at the 2013 AG-Ceptional Women’s Conference in Norfolk, NE. Being able to participate in this conference was a chance to recharge my batteries by mingling in a crowd of like-minded folks. At times, farming and ranching can be very isolating. In fact, I probably talk more to my cows than to people on most days!

Being at a conference like this one was a good reminder for all of the women in attendance that there are others out there who live the same lifestyle and have similar experiences. So on a bad day, they can think of the strong network of folks who are walking in similar shoes and know that they aren’t alone.

When you get a group of nearly 400 agricultural women in the room, there are a lot of commonalities -- daughters, wives, mothers, friends, sisters. Through conversations with these women, it was evident that one of the most shared joys throughout the room was being able to raise children on a farm or ranch. Although I’m not in the children-raising category yet, I would have to agree that being a farm kid was a great way to grow up.

 

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I ran across a great blog post the other day written by Alison Bos, entitled, “Growing Up On A Farm: 25 Facts About Being A Farm Kid!”

Bos writes, “This post is dedicated to all you past, present and future farm kids out there. There may not be very many of us, but we truly are one-of-a-kind. In all honesty, I don’t know of a better way to grow up. Yes, we worked hard. Yes, we can tell stories all day long about our experiences both good and bad. Most importantly, we are proud to be farmers’ sons and farmers’ daughters. We are proud to be born and raised farm kids. We are proud to be future farmers. There is no doubt about it, we really are lucky!”

Bos listed the 25 things that make farm kids great, and some of my favorites include:

1. When you were first asked what you want to be when you grow up, you could not think of anything other than a farmer. Duh! 

2. You did not open your Christmas gifts on Christmas morning or go trick-or-treating on Halloween until all the chores were done. And you did not complain about it.

3. You have had the opportunity to see more sunrises and more sunsets than most kids your age did. That is pretty cool.

4. You could tell if a cow was calving by the age of eight. You got to see more live animal births of any kids in your class. Once again, cool kid status reached! While we are on the subject, you could tell if an animal was sick. You could determine how crops were doing. You could count hay bales during hay season. You knew a great deal about medicines, fertilizers and other farming practices. You were that smart.

You can read the complete list here.

What made your childhood on the farm or ranch great? What lessons do you hope to impart on your little ones? Share your stories in the comments section.

 

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Let’s Embrace Being David And Not Goliath

My wife recently gave me the book “David and Goliath” by Malcolm Gladwell. I haven’t finished it, but I’m putting it in that category of a book you should read, unless you’re one of my competitors.

However, the book holds several lessons I think we should think about from an industry standpoint. The book’s beginning makes the point that we’ve always looked at the biblical story of David and Goliath in the wrong way. The conventional thinking is that David’s victory over Goliath isn’t really surprising because giants have their weaknesses.

In reality, the art of battling and beating giants often comes down to not fighting them on their terms; in the case of David and Goliath, not fighting them on their own ground and in the way they are accustomed to fighting.

For instance, giants like the Humane Society of the United States will continue to win victories over livestock production if we try to battle them on the basis of money and long public relation campaigns based on emotional pleas. The one thing you must avoid is fighting a defensive battle against a giant. Rather, you want to attack giants where they’re vulnerable, and where they’re not expecting it.

 

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As an industry, perhaps we underestimate what our greatest strength is, and how the opposition’s strength makes them vulnerable. Taking on our enemies where they are the strongest just doesn’t make sense if we really want to win.

One of the interesting points of the book is just how often an underdog decides to fight the established opponent on their own ground in their own way, despite it spelling certain defeat. Why did they do it? Mainly because it was easier and because they somehow felt it is the “right” way to win.

Ironically, the worst thing about our industry may be that we are pretty good at playing on our opponent’s ground. I think we’re good enough at playing their game, but we haven’t been desperate enough to adapt the harder strategies of being the underdog. We need to embrace the fact that we are David and not Goliath, and act like him.

 

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Profitable Ranching Necessitates Both Mental And Physical Work

Profitable Ranching Necessitates Both Mental And Physical Work

In one of my first columns for BEEF, I presented my five essentials for successful ranch management. These include:

  1. Our approach to management needs to be both integrative and holistic.
  2. Strive for continuous improvement of the key resources – land, livestock and people.
  3. Assemble and use good analysis and decision-making tools.
  4. Wage a war on cost.
  5. Emphasize marketing.

Item three suggests that we should assemble and use tools for analysis and decision making. Good production and cost records are vital for decision making. We often have these records, but fail to use them appropriately; rather, we make decisions based on our intuition or recollection of the past.

It’s critical to spend time away from the physical work part of our jobs and engage in analysis and decision making. A few hours each week spent on analysis and thought-driven planning can pay huge dividends. This is best accomplished at a desk or kitchen table; or if several people are involved, in a conference or board room setting. While you might do some of the analysis yourself, be sure to involve others in seeking input to the analysis and evaluating the ideas.

Items four and five suggest a lot of our planning time should be devoted to cost reduction and marketing. By cost reduction, I’m referring to cutting overhead as much as possible. This includes land costs, facilities, buildings, equipment and people.

Then you want to improve or increase gross margin where gross margin is total revenue minus direct costs. I just did an analysis where 37% of a ranch’s sales came from cows and bred heifers. Each of the units of production and sale had a different cost and value.

So, we need a method to analyze different ways of organizing our production systems. I use a spreadsheet that I started to use as a graduate student many years ago. Back then, I had to do it all with a pencil and handheld calculator. When computers became smaller and more powerful, I moved the spreadsheet to a computer. With ideas and help from others, I have been making it better ever since.

I like to look at all the livestock enterprises as if they were one enterprise. By doing this, I don’t forget to think of inter-enterprise activities and relationships that need to be considered.

I start with an inventory-based stock flow, which starts with the beginning inventory, then projects births, deaths and ending inventory. Sales become the number that you can sell and still have the desired ending inventory for each class of livestock.

The stock-flow form I use (shown below) has been used for many years by a number of people with slight modifications. In this example, I’ve made next year’s beginning inventory the same as the current beginning inventory to allow a comparison to other scenarios on a fully stocked, static basis.

I might evaluate changing to purchased yearlings only; or I might keep the steer calves over to yearlings. I might look at slowing the herd turnover and selling more heifer calves. I might analyze purchasing replacement cows, terminal crossing to get bigger calves, and sell all the heifer and steer calves at weaning or after a preconditioning period. You can analyze almost anything you can imagine.

Following the inventory projection, the spreadsheet includes a sales chart that shows number sold, weight, price and total receipts for each class of animal. That’s followed by a purchase chart that does the same thing for purchases by class.

Then I have a budget sheet for each feedstuff that I may purchase. It takes the beginning inventory and purchases of livestock, and shows the amount fed daily, the number of days fed, the price of the feedstuff, and the total projected expenditure for each class of animal. In another chart, we show other incidentals, like brand inspection, trucking, vet and medicine, etc., that vary with the number of animals.

From all this we can calculate total livestock sales minus livestock purchases, plus or minus the value of inventory change from the beginning to the end of the year, minus all direct costs. This calculation gives us a total or combined livestock gross margin. Remember that we still need to subtract overhead to get to profit.

I will usually do this for the current situation, and then do additional stocking scenarios as mentioned above. The great advantage of this approach is that it keeps you consistent in pricing of sales and purchases, in sale weights and animal performance.

To assure that you’re comparing on an equal basis, you need to calculate the number of animal units you’re carrying by class of animal. For example, a cow with a calf at side for half of the year might be 1.2 animal units (AU); a yearling might be .7 AU, and a bull 1.3 AU. Then you must adjust inventories of the new scenario to have the same, or very nearly the same, number of AUs as in the current scenario.

This usually takes a few iterations, but the computer does the arithmetic very fast. In this manner, you can look at any number of stocking and marketing alternatives very quickly. If anyone on your team thinks they have a better idea, just model it and see.

At first, I like to model widely diverse scenarios to get a general idea of the major changes that might be needed. Then, after making major decisions, the model can be used to fine tune. For example, I might ask “what if I converted my hay land to pasture and purchased winter hay needs?” I’d also want to shorten my hay feeding season as much as possible. The cowherd can now increase because of outside purchases of hay. My overhead (all the costs associated with making hay are overhead to the cattle enterprises) will shrink. Remember the overhead is not part of gross margin, but greatly affects profit. 

Once you set it up, this and many other alternatives can be accurately compared. Make sure prices projected for various classes and weights of animals have an appropriate relationship to each other. It doesn’t matter so much if all prices are a little high or a little low, but if you show a 450-lb. calf will sell for the same price as an 850-lb. yearling, or that a yearling steer will sell for the same price as a bred cow, your analysis won’t be worth much. I like to call this “internal pricing consistency,” which is making sure you have the proper price relationship between classes and weights of cattle.

Most of the financially strapped ranches that I encounter are doing what they do quite well. The problem is that what they’re doing and what worked well 20 or 30 years ago doesn’t work today.

These ranches must change what they’re doing rather than improve what they’re doing. This is a tough concept to buy into, and it closely relates to the “paradigm lockdown” discussed in last month’s article. We will take this another step next month.

Burke Teichert, consultant on strategic planning for ranches, is retired as vice president and general manager of Deseret. He can be reached at burketei@comcast.net.

 

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ethanol consequences for beef producers

“Farm the best and leave the rest.” That sounds like a good rule of thumb for optimizing cropland and doing it profitably. But what happens when the economics of that axiom are upset by outside forces – ethanol subsidies, for instance. A South Dakota State University study released last March provides a pretty good illustration.

Study authors Christopher Wright and Michael Wimberly estimate that 1.3 million acres of grassland in the Dakotas, Minnesota and Nebraska were converted to crops between 2006 and 2011. Such sod-busting has been concentrated in the Dakotas, east of the Missouri River, writes Michael Fritz in the November issue of BEEF . He cites the authors as characterizing the magnitude of this conversion as “being similar to the peak rates documented during the 1920s and ’30s, when tractors and other mechanized equipment came into widespread use.”

In fact, the Associated Press reports that U.S. farmers planted 15 million more acres of corn last year than a decade ago, taking a lot of land out of conservation use. Who can blame these sodbusters, however? They’ve only responded to the market signals.

In a recent Associated Press series on the decline of the grasslands, authors Chet Brokaw and Jack Gillum write about how the prairies are vanishing in the quest for green energy.

“Expansion of the Corn Belt is fueled in part by America's green energy policy, which requires oil companies to blend billions of gallons of corn ethanol into their gasoline. In 2010, fuel became the No. 1 use for corn in America, a title it held in 2011 and 2012 and narrowly lost this year. That helps keep prices high,” they write.

 

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But the loss of grasslands isn’t the only deleterious effect of the push for renewable fuels. While environmentalists and the federal government pooh-pooh and obstruct where possible the use of privately funded hydraulic fracking for abundant, highly efficient and affordable natural gas, billions in taxpayer dollars flow to much less effective technologies like wind and solar. And the unintended environmental effects don’t get much notice.

For instance, many of California's solar plants are located in the Pacific Flyway, one of the four major north-to-south trajectories for migratory birds. Thousands of birds are dying in one of two ways – they mistake the shining solar panels for bodies of water and crash into the panels, or plunge to the deaths when the ultra-polished solar mirrors bounce sunrays strong enough to burn their feathers.

In addition, a new study published in the journal BioScience estimates that more than 600,000 bats died last year in the U.S. as a result of hitting wind turbines. Mark A. Hayes, a University of Colorado-Denver bat biologist, says that estimate is “probably conservative.” Using the “precautionary principle” that environmentalists love to cite to halt development, maybe a moratorium on further windmill installations is warranted.

Meanwhile, research reported in the Journal of Raptor Research states that windmills have killed at least 67 golden and bald eagles in the last five years. That figure could actually be much higher, the article says, and Mike Parr of the American Bird Conservancy, calls the tally, "an alarming and concerning finding.”

The Daily News article points out that “wind farms are clusters of turbines as tall as 30-story buildings, with spinning rotors as wide as a passenger jet's wingspan. Though the blades appear to move slowly, they can reach speeds up to 170 mph at the tips, creating tornado-like vortexes.”

When can we expect an activist Matt Damon movie about all this?

 

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Thanksgiving Is A Time To Rededicate Ourselves To Others

Thanksgiving Is A Time To Rededicate Ourselves To Others

This fall, I visited with producers who are mired in three years of ongoing drought. Their livelihoods and their futures are literally turning to dust before their eyes. I’ve also seen the devastation wrought by floods and blizzards, but I have to admit that these tragedies also serve to remind me of just how fortunate we are as well.

Despite the trials and tribulations, the industry has a lot to be thankful for. We have moisture in many areas that were deficient, lower feed costs, record prices, etc. Of course, as Americans, all of us were given an amazing gift, a gift bought and paid for by past generations. Isn’t it ironic that the greatest blessings are rarely earned? Among these I would count my faith, friends, family and country.

These are largely gifts that most of us don’t earn ourselves, and probably don’t deserve. So you’d think we would be inherently grateful for these blessings. However, we often need to be reminded just how fortunate we are.

Perhaps we forget to be thankful for all that we’ve received because we convince ourselves that we’ve earned them, and that the bad things that occur to us are unjust outcomes of a random and cruel cosmos. Perhaps it is ego, or perhaps it is that we realize that with such an abundance of blessings comes great responsibility.

For people like us, blessed by being able to work in nature and care for God’s resources and animals, I think we have a higher bar to reach. Like the Bible says: “To who much has been given, much is expected.”

Perhaps that’s why Thanksgiving is such an important time of the year; it makes you focus not only on how fortunate you are, but what you have been called to do as a result of those blessings. I’m one of those who believe the desire to achieve more, and to strive for more, is inherently a good thing. And as I grow older, and hopefully wiser, I am beginning to understand that real wealth has little do with money, and that the real challenge isn’t in wanting more or comparing yourself to others. Rather, it’s how you can contribute to your family, community and world in a meaningful way in accordance with your talents and purpose.

Thanksgiving is a time to appreciate what you have. To me, nothing is sadder than those who are incapable of enjoying what they have because they are wanting more. It is almost paradoxical, but the most blessed are often the least grateful.

 

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John Wooden, the legendary basketball coach of the UCLA Bruins, once said, “Talent is God-given. Be humble. Fame is man-given. Be grateful. Conceit is self-given. Be careful.”

I look at what I’ve been given – a chance to ranch, a wonderful family, good friends, and it is far more than I could ever deserve.  I’m grateful, and I pray that I might show that gratitude in a way that spreads the blessing. I hope you all have a blessed Thanksgiving, and don’t forget to thank a veteran for your freedom.

 

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Okay, I’ll Say It: The Beef Industry Has An Animal Welfare Problem

Okay, I’ll Say It: The Beef Industry Has An Animal Welfare Problem

They say the first step in solving a problem is recognizing you have one. I received a lot of comments a few weeks ago following publication of my piece on an undercover activist’s video depicting abuse of young dairy calves on a Colorado calf growing farm. This week, another video surfaced; this one from a pig operation in Oklahoma.

The comments I received regarding the Colorado case took me to task for understating the problem, and not calling out those where the problems are disproportionately directed from. Their point was simple – almost all of these revelations of abuse come from very specific entities within our industry, the first being the dairy industry. And we’re doing everyone a disservice by not calling a spade a spade and dealing directly with the heart of the problem.

I’ll admit that their words stung a little bit because I know they’re right. The problem with being a true fan of this industry and an active participant in it is my tendency to not want to offend anyone. I hate painting any group with too broad of a brush because the majority within that group are usually very good people with good motives.

As I’ve said, the vast majority of producers are great people, but the reality is that a hugely disproportionate number of problems associated with downer cows, drug residues, and animal welfare in general can be associated with the dairy industry. Perhaps it’s because of that sector’s reliance on hired labor, part of which doesn’t share the animal husbandry ethic. Perhaps it can be explained by the almost corporate or assembly-line approach that characterizes that industry.

 

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Regardless of the reasons, the fact is that the ethos we hold so dear regarding animal welfare in the cow-calf industry just isn’t as strong in the dairy industry. We’ve seen similar breakdowns in the poultry and pork industry, where employees aren’t vested in the animal production system in the same way that we typically see in cow-calf production.

The bottom line is that while there’s nothing inherently wrong with large-scale animal production, the system is far more likely to break down when workers are employed who don’t inherently share the love of animals and don’t have a vested interest in an operation from an ownership, profit, or value standpoint. It’s a failure of management, a failure of supervision, and a failure of education.

Some of these operations are failing in replicating the mindset, values and culture that have always been the foundation of our industry. Thus, it’s no surprise that the other problems we’ve seen regarding animal abuse are primarily from situations that reflect this same dynamic, whether it’s in sale barns, feedyards, etc.

As an industry, we must embrace the fact that this is a nexus – a point where animal welfare issues tend to arise. This is where our industry has occasionally failed. I’ve especially been guilty of standing up for the overwhelming majority of producers who do a great job, and I’ve failed to recognize that our industry responsibility is to uphold a zero-tolerance policy.

These instances of abuse are unacceptable and unworthy of such a great industry as ours. Ethics and morals, as well as economics, dictate that animal welfare should be every producer’s top priority. Failing to address these isolated problems, regardless of how rare they are, jeopardizes our entire industry.

 

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Manna Pro acquires Cut-Heal

Manna Pro Products, LLC., a leader in animal health and nutrition products, announces the acquisition of Cut-Heal.

The Cut-Heal line of products, best known among horse owners,  includes the following offerings:  Multi+Care wound care spray and ointment; Hoof Heal, a brush-on dressing that helps prevent brittle, cracked hooves and heels; Zonk-It! insect control ; and Bug Check, a feed supplement that helps deter biting flies and discourages insect breeding in manure. While the majority of the products are for equine care, many are also effective for dogs and other animals. 

In addition to the acquisition of the Cut-Heal portfolio of products, this newly formed partnership also includes an exclusive distribution in the North American ag/feed/equine/pet markets for the new "Performance Support DEEP FREEZE™" family of products.  DEEP FREEZE is a topical analgesic for pain and swelling, ideal for competitive horses and dogs, as well as for human use.

Don't get penalized for credit card security breaches

Credit cards: What would today’s retailer do without them? If you’re like most merchants you’ve found that the ubiquitous plastic card has become the default transaction tool for purchases large and small.

There’s hidden danger, though, in being too cavalier about just how your staff handles card transactions. You can be hit with costly fines and penalties if you ignore increasingly tight regulations governing the protection of customer data—especially if your violation leads to an actual release of customer information into criminal hands.

“Merchants who store, process or transmit credit card data need to understand they have a responsibility to protect that data,” says Mark Burnette, a partner with LBMC Security & Risk Services, a Nashville-based consulting firm (lbmc.com).

Costly fines

So who makes the rules when it comes to protecting customer data? The big boss here is the Payment Card Industry (PCI) Security Standards Council, Wakefield, Mass. (pcisecuritystandards.org). This assemblage of credit card associations has been steadily tightening the reins on runaway data by releasing regulations in the form of official standards. The latest iteration, dubbed PCI Data Security Standard (PCI DSS) further strengthens the procedures that must be instituted by merchants by the end of 2014. (For details see the sidebar, “Get More Help.”)

Fail to follow the PCI compliance rules and you may well be targeted for damages by your “acquirer”—the bank which provided you with your merchant account. Read your contract closely and you’ll find that the bank has the power of the purse: “If the acquirer finds that you have been consistently noncompliant, fines can be assessed,” says Burnette. “And an actual breach of data can lead to even higher penalties.”

The extent of monetary damages depends on the size of the merchant, the size of the breach and the number of cards involved. Penalties have ranged from $10,000 into the six figures and more.

Not to be underestimated, either, is the costly hit a publicized breach can have on a merchant’s reputation. Many consumers will be reluctant to shop at an establishment where a breach has occurred.

But perhaps the greatest motivation for towing the line is the threat of losing the merchant account itself. “The card association may take away your ability to accept credit cards at all,” says Burnette. “That can be extremely costly to any merchant.”

Protect yourself

While failure to follow mandated data protection guidelines is foolish, the good news in all this is that you can take positive steps to minimize risk.

Start by drawing up a statement of standard operating procedures (SOP) for everyone in your organization. “Make sure you have a clear written policy about how to handle credit cards,” says Burnette. “And make sure your employees have been educated on the policy. Bring up the topic regularly in your staff meetings.”

Your SOP must address the critical need of keeping sensitive customer numbers under wraps. “Where the merchant is most vulnerable is in the accidental mishandling of card information,” says Burnette. “Suppose, for example, an employee takes an order over the phone, jots down the card number on a piece of paper, and then later drops the paper into the trash instead of a shredder. That violates the PCI and is bad business practice.”

Another good rule is to keep the credit card in the hands of the customer as long as possible. “Employees should quickly process the card and return it,” says Burnette. “This will keep the card from being accidentally grabbed (or from having its number written down) by someone else.”

The right hardware can be as important as the right procedures. Have you been using the same POS equipment for many years? It may be time to replace it. “Some retailers still have legacy equipment that they don’t even realize is capturing cardholder information that can be compromised,” says Paul Rianda, an attorney in Irvine, Calif. (riandalaw.com). “In contrast, if merchants use newer equipment, and use it correctly, there should be no way to lose cardholder information.”

Computer systems face special challenges: “You need to establish rules about passwords and about access to the computer system,” says Burnette. “Each employee should have a unique security code which they are forbidden to share with other employees or even with managers. The passwords should allow access only to those sections of the database required to do an individual’s job.”

You should use only hardware and software that has been approved by the PCI Security Standards Council (approved vendor lists are available at pcisecuritystandards.org). Make sure you are using a firewall, and that your wireless router is password protected and uses encryption. And change the default hardware passwords to complex ones.

Third party

As the world of electronic commerce has become more complicated, regulations become more demanding. “There are over 255 individual requirements for PCI compliance,” says Burnette. “All of them have to be met. There is no wiggle room.” Little wonder that merchants are sidestepping the requisite procedures by farming everything out to a third party organization such as an ISO. “Offloading responsibility to a third party is a good solution,” says Don Hartley, a consultant with Savannah, Georgia-based Tata Consultancy Services (tcs.com).

Don’t get trapped, though, by a false sense of security. You can outsource the operational duties for carrying out PCI compliance, but you cannot outsource your responsibility for protecting customer information. If something goes wrong, you will be assumed guilty.

To protect yourself from fines and penalties make sure your contract specifies the third party’s responsibilities for setting up and maintaining computer systems that comply with PCI standards. You should also ask the third party to provide an annual “PCI report on Compliance” signed off by a qualified security assessor (QSA). This should be done once a year. Both these steps will help protect you if the third party violates regulations.

Need to know

Many of the protective steps suggested in this article derive from a broader maxim near and dear to the hearts of security people everywhere: Retain only the information you need. “Follow the rule that says ‘if you do not need customer information you should not keep it,’” says Burnette.

Education is the first step to safety. Many smaller merchants are not aware of the duty to protect customer data, nor of the continually morphing rules. Ignorance of the law, as always, is no excuse. Taking the basic steps in this article will reduce your risk considerably. Says Burnette: “Make sure you have a written policy in place, train your employees properly, and make sure your computer system is PCI compliant.”